#365 Nick Sleep's Letters: The Full Collection of the Nomad Investment Partnership Letters

you cannot just focus on the outputs if you do you're going to sell you have to really understand the central engine of success you have to understand that business deeply

you need to be heavily concentrated and bet heavily it could be argued that lots of things had to go right for Walmart to grow for 40 years that is certainly true but at its heart a very few simple things really mattered in our opinion the central engine of success at Walmart was a thrift orientation so low costs low waste fueling growth with the s

Nick is seeing himself in that story right now in 2008 he's like I got I got Berkshire I got Amazon the key is

to not mess that up he the key is to not interrupt this these honest compounding machines which in itself is a decision a daily decision not to do anything and arguably more difficult than to do something because I think we are naturally wi

our manager has already made his first mistake in investing in Costco from not buying enough

it's aggravating to buy just a little bit but this is a hard question to answer so it says in reality opportunities in which we are comfortable to deploy Capital are rare and the highest conviction idea is the rarest of them all the issue then is

how much to invest in each idea and this is Nick's takeaway from thinking about the Kelly Criterion the

hy is it that no one but the founding Walton family owned

Walmart all the way through Zach and I were told a story which we enjoyed enormously and might help illustrate this point in the early 1970s a large successful fund management company analyzed its portfolio and discovered that their sale of IBM 30 years earlier had been a huge error of omissi

book it is written by Bob kierin who's the founder of fenol that book and the way Bob ran fenol all centers around this one idea that the leader of a company has to keep the entire organization committed to a common goal Costco's common goal is that we are going to commit to this everyday low

pricing strategy and they commit to it every single minut

intellectually honest and economically rational but that alone is not enough there are many companies that do the right thing when their backs are against the wall the anointed few are there because they have chosen to outthink their competition and allocate Capital over many years with discipline to reinforce their firm's competitive

what the problem is what if we're right what if these are wonderful businesses what if Costco is going to get much bigger from here why is it then when you look at the history of investing that so few people cannot see success and what he means by that is they sell way too early so he says we take no comfort from the fact that not seeing success is